The government will not aggressively recapitalize PCA banks. The government announced Rs.48,329 crore recapitalization plan for 12 PSU banks; most of which will be pumped into PSU banks under prompt corrective action (PCA). The government will infuse close to Rs.16,000 crore into Corporation Bank and Allahabad Bank to help them maintain regulatory capital requirements. Other banks to benefit from the recapitalization include Bank of India, BOM, PNB, Union Bank, Andhra Bank, and Syndicate Bank. This infusion will help these banks get back to their feet.
After a long time, there has been a distinct slowdown in air traffic as domestic air passenger traffic growth slowed to 9.1% in January 2019. Among the leading carriers, Indigo and Air India saw a fall in their market share while Spice Jet and Jet Airways gained market share during the month. The average growth in the previous months has been closer to the 16-18% range and this could be explained by multiple flight cancellations which impacted flight capacity. Of course, negative CASK-RASK spreads continue to be a challenge and that remains the big pressure point for aviation companies.
The much-awaited GST rebate for realty did not come through as the 33rd GST Council postponed the final decision on a tax cut for real estate sector. The realty sector in India was largely counting on the GST Council Meet to reduce GST rates on under construction property to 5%. However, the GST Council under Arun Jaitley has opted to postpone this decision. This required the buy-in of the participating states since realty continues to be a state subject. This move was expected to give a boost to the realty sector in India. This will be taken up in the next meeting of the GST Council.
There could be bad news for provident funds that invested aggressively in private sector bonds in the last couple of years. The government has confirmed that the PF exposure to IL&FS bonds is unsecured In what could come as a shocker to millions of provident fund investors across India, the government has confirmed that the money invested in IL&FS bonds by nearly 50 funds that manage the monies of 15 lakh PF holders, is unsecured. There had been talks of a government guarantee on these investments but the government has asked the funds to take the hit on IL&FS bonds exposure.
Sensex bounced by 403 points on Wednesday on short covering and global optimism on the back of 9 consecutive days of correction in the markets. About of short covering helped the Nifty and the Sensex close sharply higher. There were also global triggers as world markets celebrated Trump’s statements that the March 01st deadline for resolution of trade tariff war between the US and China could be postponed. In addition, the Fed is also expected to give dovish minutes. Oil has been a major concern in the last few days due to the price of Brent Crude crossing the $66/bbl mark. However, crude was a tad subdued on Wednesday after the US reported record shale output. However, the sanctions on Venezuela and Iran will remain an overhang for oil prices.
The Supreme Court has finally declared Anil Ambani guilty of contempt of court in the Ericsson case. The Supreme Court found him guilty of contempt for defying court orders pertaining to payment of a penalty of Rs.550 crore to Ericsson. The court has now instructed Anil Ambani and two directors of RCOM to deposit the balance Rs.450 crore with the court within 4 weeks. The company had already deposited Rs.100 crore with the court. These pertain to unpaid dues payable to Ericsson for managing the network of RCOM and the outsourcing deal was signed with Ericsson in 2014.
